Is the FED Done Raising rates? + Futures Trading Levels for Nov. 16th

Updates and Bullet Points:

By Mark O’Brien, Senior Broker

General:

Here in the United States yesterday, stock index futures vaulted on the heels of the Bureau of Labor Statistics’ release of its Consumer Price Index for October, which slowed to 3.2 percent last month on a year-over-year basis, lower than the 3.7 percent reading in September and the coolest since July.  Leading the way was the Russell 2000 which climbed ±95 points, $4750 per contract move for the E-mini Russell 2000 futures contract, over a 5% uptick.  Compare that to the ±86-point / $4,325 per contract move up for the E-mini S&P 500, or the ±335-point / ±$6,700 move for the E-mini Nasdaq.

Investors undoubtedly anticipated the likely end to the Federal Reserve’s historical rate hike cycle and this was followed by a wave of lower CPI data from Europe when the following day (our Tuesday night) Germany, the United Kingdom and Italy all reported below-estimate consumer price readings and well below last month’s as prices abroad continued to decelerate.

In other news, President Biden and China’s President Xi will meet south of San Francisco during afternoon US trading hours.

In a development attributed to El Niño and possibly a catalyst to rising commodities prices, Central America is experiencing drought conditions so acute, the freshwater lakes associated with the Panama Canal have declined to such low levels, it’s resulted in one of the world’s largest shipping corridors having to reduce vessel traffic.  The canal sees about 5% of the world’s seaborne trade travel through it and is critical for transporting commodities with petroleum, liquefied natural gas and grains among the top shipments that pass through the waterway.  Ships are now spending weeks waiting at sea, sailing around South America or the tip of Africa, or paying exorbitant amounts to jump to the front of the line.  Last week, a Japanese global petroleum and metals conglomerate paid a record $3.975 million in an auction for preferential line placement for one of its ships.

In a Reuters piece earlier this week, the news wire reported that Goldman Sachs is forecasting returns of 21% on commodities over a 12-month horizon, using as its basis the S&P Goldman Sachs Commodity Index (GSCI), including gains of ±31% from energy and ±18% from industrial metals.  Currently, the GSCI contains 24 commodities from all commodity sectors: six energy products, five industrial metals, eight agricultural products, three livestock products and two precious metals.